PRO 13-02-2012_Layout 1 2/13/2012 12:57 AM Page 1
The energy dilemma Page 23
profit.com.pk
Monday, 13 February, 2012
SBP Policy announcement
Time for the central bank to believe in omens ali Rizvi AKIStAN’S central bank announced on Saturday that it would keep the policy rate unchanged at 12 per cent for the next few months in order to contain expected inflation in the second half of the fiscal year. the central bank had in an earlier decision cut the policy rate by 200 basis points, a decision that was welcomed by the private sector and investors alike. However, the State Bank of Pakistan is in a precarious situation where traditional economic paradigms have failed them. the contractionary monetary policy employed by the Central Bank has failed in serving its due purpose. Inflation remains high, while crowding out of the private sector is choking business and industry. Private sectors invariably require stimulus through the economy and this can be provided in the form of easy access to finance, pragmatic government policy and low interest rates. Foreign investment assists in the formation of human capital, leads to international trade integration and aids in creating a conducive environment for businesses. While traditional economics dictates that raising interest rates control inflation, this policy has not worked in Pakistan where only food inflation in the last year propelled to a massive 45 per cent. Excessive borrowing from the SBP is diluting interest rates leading to crowding out of the private sector. therefore,
P
Hammad malik t is quite rare to find economies with limited scope coupled with an itchy stance towards prosperity and progress. However, having access to almost everything and still not making use of it is unfortunate. While our capital markets continue to emerge, we still have miles to cover before a proper debt market comes into existence. the rapid popularity gained by the banking system in the ‘90s and the succulent returns advertised by them has given birth to a tendency among the masses to deposit their holdings, or savings for that matter, in bank accounts. I am not against this culture, but productivity is what I want to emphasise upon. At the same time, we need to learn from the banking culture of inducing as well as attracting people towards them, something which the capital markets have failed to
I
instead of increasing the supply of credit to the private sector, the authorities have been financing unproductive expenditures through excessive borrowing. A state bank report mentions how policy makers have been effective in containing their spending by cutting down on ‘development expenditures’. the State Bank further notes in their report that inflationary pressures have accumulated mainly owing to the “lagged impact of government borrowings from SBP, frequent upward adjustment in utility and POL prices, increase in commodity; and rising house rent index.” If one were to scrutinize the situation, it would be easy to conclude that inflationary challenges are inherently supply side constraints that can be dealt with even in the face of an expansionary fiscal and monetary policy. In the recently released report of the SBP the external account posted a deficit of a mammoth 1.7 billion dollars during Jul-Nov FY’12 compared to a surplus of $100 million in the corresponding period last year. the Central Bank has been brutally honest in its observation of the emerging scenario. “Although deterioration in current account was on the cards, the timing and magnitude was unexpected. this larger than expected worsening was mainly concentrated in the month of Sep 2011 when simultaneous surge in trade deficit and fall in
current transfers led to over a billion dollar deficit in the current account during this month alone,” the recently released first quarterly report of the SBP states. With foreign aid drying out, the SBP has had to rely on drawing from the foreign exchange reserves to curb the external account deficit. On account of debt repayments and absorbing the external account deficit, Pakistan’s foreign reserves declined to 16.69 billion dollars in the week ending Feb 3, compared to a record 18.31 billion dollars in July. With Pakistan’s oil prices linked to the international crude oil prices, it is expected that inflation while still under control at 10.10 per cent year on year in January will rise more than projected. Pakistan has even opted out of the IMF programme where the latter expressed concern over the lack of progress in fiscal reforms. While the State Bank of Pakistan can go all out in its efforts to control inflation and try to manage the brewing economic disaster, the situation cannot improve without concerted efforts to prudentially manage fiscal affairs. the ramifications of the decision from the State Bank to keep the policy rate at 12 per cent may be justified in the short term; however, this will merely spell disaster in the coming months. Allow me to explain my understanding of the situation at hand. While the problems
may be many, it is high time for the SBP to believe in omens. And, with the preferential trade agreement with the EU to be implemented by March, it is a wonderful opportunity for the powers that be to facilitate exporters and the industry to ensure penetration in the European Market. By resolving the issues of the domestic industry, and providing them with a level playing field against its competitors, Pakistan can tap into the opportunity and significantly increase exports to the EU market. Other similar opportunities are on the horizon, with a plethora of markets promising great potential for local exporters. In the meanwhile what is required is of the Central bank is to facilitate the industry by providing them with easy credit. Stimulating the industry is the only way for Pakistan to move forward, and the stimulus must not be an injection of subsidy, but the establishment of an environment that attracts foreign investors and supports the local producers. By keeping the policy rate fixed at 12 per cent, and not demanding of the powers that be to put their house in order and rein in the budgetary borrowings, the SBP is doing the people of the country a huge disfavour. How can the government handle the precarious situation? Well they should work in a transparent and competent manner to privatize the loss making Public Sector Enterprise that are gobbling up a humungous chunk of money and still making losses. So SBP, I think its time for you to believe in omens. For comments: ali.rizvi7957@gmail.com
Developing the debt market do. While I maintain my stance of rating stock market as the safest mode of investment, given that it is a mirror of the economy, investing in debt instruments should also be promoted by concerned authorities. By debt instruments, I refer to the corporate debt certificates which are issued with a predefined rate of return and in case of bankruptcy, get their share even before the shareholders. In Pakistan, companies have tried their best to promote this mode of raising capital, but lack of knowledge among the general masses has not helped their cause. talking specifically about the Asian belt, emerging economies and potential financial hubs have ensured that corporate debt adds up a decent percentage towards
the GDP of the country. the nationalisation saga during the 70s and a subsequent regression of the same can be quoted as a major reason for the slow development in the same cause, but not the only reason. Frequent changes in investment policies and an irregular system of the existing markets has not done wonders to the investor confidence and the SBP, along with SECP, need to find a permanent solution to infuse a sense of stability among investors. 2002 saw Karachi Stock Exchange being named the Best Performing Stock Market of the World, attracting a sea of foreign investors thereafter. this performance continued till 2008, when KSE was nominated the best performer among major emerging markets. However, record high inflation and political
instability forced the index to record low levels, imposing a fivemonth floor thereafter. the inconsistent monetary policy stance coupled with the rapid depreciation in the local currency has served a hefty blow to the local as well as the foreign investor. A rise in discount rates unnaturally pulled funds out of the stock markets, directing them towards saving schemes and money market. With major investors fleeing to other havens, there was little incentive for retail investors to invest in the then prevalent circumstances. Now that the inflationary trend is opposite and the SBP is reducing the discount rate steadily, a sense of calm seems to take cover. the relationship between interest rates and debt instruments is vital to
understand before making an investment choice in the existing scenario. the inversely proportional nature of the two suggests that money should flow into the stock market with a decrease in the discount rate, which increases prices of bonds and thus reduces the yield. However, if there is a sentiment of an increase in the interest rate, investors should re-direct their savings towards the debt instruments in order to avail maximum returns. A rapidly depreciating rupee does not help investors. It might be of advantage to exporters, but quality production is prerequisite. With energy crisis not allowing industry to function, I doubt its advantage, if any, at this stage. The writer is Head of Strategy at First National Equities and can be reached at hammadmalik@fnetrade.com
Of economists and pessimism NEWS ANALYSIS Sakina HuSain
I
t is unfortunate that although the society has amassed education to the brink, as a complement (in the economic sense) it has nurtured self assurance and confidence that bar it from paying heed to any competing claims. While this has gone historically unchecked within this country at least, the results are ostensible from all angles viewed; the stock of knowledge has not grown despite a large multiplication in the number of degrees doled out. And hence there has been only regression. thereby, the writer has dedicated the article to bringing all those who wish to read on the same background platform, which she hopes will aid to better understanding of, in short, an economist’s point of view. In the list of lessons, the first will hopefully take us all back to our freshman years; there is a great tendency to treat stock and growth variables as the same. So, in theory, while the output produced by the textile, cement and auto sector may be at the same level as last two years, the stock has not ‘grown’ or shown improvement. this can be considered a worrisome indicator, as it shows that the demand for a particular sector’s product is stagnant, thus limiting the opportunities for job creation and most importantly the incentive to invest in the industry. And while it is true that Pakistan is the fourth largest market for mobile phones, most analysts would point to the saturation in the sector, explaining why network providers and the government have delayed the introduction of new technology, 3G/4G, etc. the non-creation of demand in the sector has led to increased competition, declining average revenue per user (ARPU) and a lower space to make profit. Moreover, on the investment front, the total FDI in the telecom sector during FY11 amounted to $496 million down from $1,138 million in the preceding fiscal year. And, while the prospect of growth and more FDI lies through the 3G front, rest assured the government is looking forward to the auction license revenue for financing its deficit. Coming to the second claim and source of much pride; our ‘booming’ real estate market standing high in the face of economic challenges. Why an economist would not pay much heed to this sector is that rising land prices in the face of lagging economic growth implies that the extra liquidity in the economy is being channeled towards purchasing land! Unless investment growth in productive enterprise is revived, the economy will be a victim of greater debt, international dependence and more importantly brain drain. Analysts also claim that the billion dollar remittance that is buttressing the external account is primarily feeding land prices. What are we going to do with a rising stock of houses for a segment of the population when the larger segment lacks access to food, healthcare and education? A third lament, which gets counted as a huge plus, is that consumer demand in the economy is strong. the main source of consumer spending documentation relies on price data multiplied by the amount of goods sold. A steady growth in this multiplicative number implies that the 200 per cent growth in prices is far less than the fall in demand. And that too is demand for basic necessities such as food, fuel, clothing, etc, which is basically fixed, less responsive to price hikes or inelastic in nature. Aside from investment, positive indicators to judge any economy surround the prospects of improvement for the larger population. these could be high real income per capita, job creation, real improvements in state spending on health care and education. Give economists a reason to be happy? The writer is an economic researcher and freelance financial journalist. She can be reached at sakina.husain@gmail.com
PRO 13-02-2012_Layout 1 2/13/2012 12:57 AM Page 2
22
Monday, 13 February, 2012
news
Bulls dominate proceedings throughout week
Oil falls on Greece deal doubt, but up on week B
kaRaCHi STAFF REPORT
oil PriceS fell on friday, But PoSted gainS for the week, aS the lateSt hitcheS in negotiationS on a greek Bailout Package PreSSured oil, the euro and equitieS nEW YORk REUTERS
reduced oil demand growth forecast from the International Energy Agency (IEA), the sixth consecutive monthly report with diminished growth expectations, also helped pressure oil. the euro fell and the dollar index. DXY strengthened after the leader of the farright party in Greece’s coalition declined to back a bailout agreement, once more raising concerns about the risk of a default. “today’s selloff across the complex was easily explainable as oil simply became entrenched in a broad based risk-off trade related to continued lack of progress on a Greek debt deal,” Jim Ritterbusch, president at Ritterbusch & Associates, said in a note. Brent March crude futures fell $1.28 to settle at $117.31 a barrel, snapping a string of eight straight gains and following the previous session’s close at $118.59, the highest settlement since late July. the stumble still left Brent up 2.38 percent for the week, its third straight weekly rise. U.S. March crude, after three consecutive higher settlements, fell $1.17 to end at $98.67 a barrel, but preserved an 83-cent weekly gain. Speculators raised their net long positions in U.S. crude futures and options in the week to February 7, Commodity Futures trading Commission data released on showed. Brent’s premium to U.S. crude was little changed, hovering around $18.65 a barrel. Brent’s retreat ahead of the weekend, after the recent sharp price rise, was not unexpected after its Relative Strength Index pushed above 70 this week, signaling an overbought condition for investors watching technical indicators. “the market has paused for breath after its sustained rally,” Mark thomas, head of European energy at brokerage Marex
a
Spectron in London, said. U.S. equities also were pressured by the wrangling over Greece’s debt problems, along with news of a drop in consumer sentiment in early February.
IEA TRIMS DEMAND VIEW Global oil demand will grow by less than 1 percent in 2012, the IEA said in its
monthly oil report, saying a weak global economy may limit demand growth this year. the IEA cut its 2012 global oil demand growth forecast by 250,000 barrels per day (bpd) to 800,000 bpd. the IEA’s view followed monthly reports from OPEC and the U.S. Energy Information Administration, with OPEC lowering its demand growth forecast because of economic weakness in Europe and the United States. the EIA raised its expectations, if by only 50,000 bpd, the first boost since October.
FRAGILE CHINA China revealed signs of slowing domestic demand as data showed imports slipping to their lowest in more than two years and weaker-than-forecast bank lending. But customs data on Friday showed China’s crude oil imports in January reached the third highest level on record as state refiners increased processing after several new refining facilities began operations. Chinese demand could see a boost from strategic reserve purchases after an expected completion of two new strategic crude oil storage sites this quarter, the IEA said in its report on Friday.
IRAN TENSIONS SIMMER Helping limit the oil market’s losses were ongoing tensions between the West and Iran over tehran’s disputed nuclear program. Sanctions are already affecting Iran’s oil production and a fall in its output and exports is likely to accelerate, industry analysts say. China on Friday said it would send a senior official to tehran to discuss Iran’s nuclear standoff with the West, and India indicated it would also weigh in, as two of Iran’s key crude oil customers try to head off new sanctions already playing havoc with trade.
ULLS continued to dominate the proceedings from the onset of the week as the benchmark gained 302 points with in two trading days as KSE-100 index reached 12,284 points. Volumes were fairly encouraging as average daily volume for the week stood tall at 169.6mn shares. From the onset of the 2012 the benchmark has gained 7.8 per cent with considerably encouraging volumes. Individual investors are returning towards the market after the announcement of relaxation of CGt announced by the Finance Minister. Furthermore majority of the results declared by the corporate sector were fairly encouraging. Majority of the investors are expecting a discount rate cut in the upcoming monetary policy statement due on Saturday while majority of the analyst community believe SBP will maintain the status quo. In a recent economic review of Pakistan by IMF stated “Pakistan’s near and medium term prospects are challenging and growth would remain too low to absorb the large number of new entrants into the labor force. In FY12 the real GDP growth is projected at 3.4 per cent and average CPI inflation at 12 per cent. Deterioration in the current account balance due to lower cotton/textile prices and a sharp slowdown in remittances growth, continued difficulties in attracting external financing and the beginning of repayments of IMF will likely to put further pressure on the balance of payments this year, with reserves projected at USD12.1bn by end of FY12”. ‘We agree with majority of the projections of the IMF except the GDP growth and remittances flow. Hopefully the government will be able to capitalize funds from 3G license auction, PPL public offering and Etisalat payments, said Bilal Asif at HMFS. In case all the above mentioned transactions
materialized; the government will be available with ample funds to manage the current account and budget deficit. During the week PSO results was announced which was well below the analyst expectation, hence the stock prices turned volatile. HUBCO results can be considered as a surprise package as the stock announced a dividend of Rs 3/share. Major banking stocks were fairly active as annual results are expected to be announced soon. NBP gained on the back of healthy dividend announcement while second tier banks including AKBL and FABL also registered healthy gains. ‘We believe benchmark may continue its upward journey in the upcoming days along with minor hiccups,’ he added. Money Market: During the week SBP conducted tbill auction where it raised Rs 146bn against the target of 125bn creating the net drainage of Rs 26bn. After decline in yield in the previous two auctions, cutoff rates climbed back up as state bank’s quarterly review created further excitement over the upcoming MPS. the auction witnessed rise in cutoff yield across all tenor with highest participation in 6 months paper. Highest rate cut was witnessed in 6 months paper by 18bps to 11.81 per cent followed by 3 and 12 months paper by 16bps to 11.74 per cent and 11.89 per cent respectively. Albeit ease-off in inflation have ignited the hopes of further DR cut in the upcoming MPS, ‘We expect SBP to maintain status-quo as further DR cut remains contentious with unwavering monetization, depreciation of PKR against greenback and rise in energy product prices to likely cause inflationary pressures to resurface as low base effect pan out,’ said Salman Vidhani at HMFS. For the week ending Jan 27, 2012 GoP retired funds, lowering outstanding dues toward SBP however foreign flows strengthened NFA whilst money supply remained unchanged at 4.25 per cent.
CORPORATE CORNER PC Peshawar organises grand musical event
PeSHaWar: In collaboration with Sonic Peace Makers, the Pearl Continental Hotel Peshawar organised a grand musical event at its elegant Kushall Hall, there were about 750 guests that included large number of families, elites of the city and music lovers. Immense discipline was demonstrated by the audience. the performers on the occasion were American vocalist todd Shea, famous local group of youngsters Khumarian along with a Chinese singer, pop star of Pakistan Farhan Saeed and legendary folk singer of Khyber Pukhtoonkhwa Zarsanga who is also the recipient of the highest civil award of Pakistan “Pride of Performance”. PRESS RElESE
our employees but also with their families,” said Mr. Irshaid while inaugurating the ‘PtCL Family Movie Night’ for employees. “the welfare and well-being of the families of our dedicated and hard-working employees is equally important to us.” PRESS RElESE
PTCL inaugurates ‘Family Movie Night’ for employees ISLaMaBaD: President and CEO of Pakistan telecommunication Company Limited (PtCL), Mr. Walid Irshaid, has said that his Company is committed to share its successes with all its employees as well as their families. “At PtCL, we want to make sure that our Company’s dividends and successes are not only shared with
A signing ceremony took place at NIB’s head office wherein a Glocal Trade Finance Programme Agreement was signed by Mr Badar Kazmi, President and CEO – NIB Bank, Mr Shafquet Asim, Head-FI of NIB Bank and Mr Khwaja Aftab Ahmed Director Financial Markets – Europe and MENA of IFC. PRESS RElESE
Plan Pakistan to strengthen child birth registration unit of DMA, CDA
ISLaMaBaD: Memorandum of understanding was signed between National Database And Registration Authority (NADRA), Directorate of Municipal Administration (DMA) of Capital Development Authority (CDA) and Plan Pakistan at federal level. At this moment Mr. Rashid Javed-Country Director Plan Pakistan, Mr. Col. (R) Khalid Khatak-D.G.CRMS, NADRA & Mr. Mansoor from CDA were present. Objective of MOU is to standardize vital statistics registration system including child birth registration at Directorate Municipal Administration (DMA) of Capital Development Authority (CDA) and link it with the national database and will be considered a role model for all NADRA Registration Centres. PRESS RElESE
PRO 13-02-2012_Layout 1 2/13/2012 12:57 AM Page 3
monday, 13 februar y, 2012
editorial
The energy dilemma
To Russia with love
W
HEtHER or not the foreign minister’s surprise Moscow visit primarily focused on generating requisite funding for the Iran-Pakistan gas pipeline, as speculated in sections of the press, remains to be seen. But there can be little doubt that Islamabad has finally requested friends in Russia to place energy at the centre of the ‘enhanced bilateral and trade ties’ posture. the timing is important. Both Pakistan and Russia have incorporated a pronounced disregard for western sanctions as their respective equations with the US have worsened, the latter much more so. Islamabad has been more outspoken of its rejection of the ridiculous tAPI alternative to accommodate US apprehensions since the check-post attack that resulted in halting nato supplies into Afghanistan. Russia has been extremely critical of America’s influence near Moscow’s comfort zones ever since Putin chose politics of confrontation at the height of America’s Iraq misadventure. Now, with US-led pressure on the verge of cracking its crucial Iran-Syria alliance in the Levant-Persia sphere, the Kremlin seems again positioning to facilitate
SKEPTICISM ABOUT TRADE I have been following Profit’s articles from a while now. this is in response to the news item published on February 2nd, about Pakistan’s trade deal with the European Union, and also in response to the news item published on February 9th, about IMF blaming the SBP for inflation. Regarding Pakistan’s economic policies, although the preferential trade agreement with the EU seems beneficial on the surface, I am skeptical about the amount of difference it can make to Pakistan’s terms of trade. the news item did not specify details of the trade pact, like which items were to be traded and how much tariffs would be lowered. No matter how lenient trade
its falling allies where it can, and Iran’s business with Pakistan is mission critical for tehran’s ayatollahs to make up, at least in part, for the sanctions choke-hold. So the rumours may well be true for once. Interestingly, with the magnitude of spill-over costs of partnering with America becoming more evident with time, the government’s sudden tilt towards Russia is reminiscent of an old debate, one that featured intellectuals and workers of the then new Islamic Republic making a passionate case for siding with Russia just when the cold war was heating. Fast-forward half a century, and there’s still much to gain for both sides, albeit in a dramatically changed environment. Pakistan needs energy to forestall crippling economic collapse. Russia has just spent the last decade flexing its energy muscle to regain lost influence in Europe and beyond. It’s very likely that a resurgent Putin, bitter at western actors for fanning discontent in his hinterland, will round off his Andropovian gambit – play Russia’s energy card – in a show of defiance marked by his return to the presidency. Pakistan stands to benefit in both energy and business terms. Surely the calculus with America is not reverting to widely
agreements seem, if Pakistan is only exporting primary commodities and in turn purchasing value added goods from the EU, Pakistan’s export will remain vulnerable and low priced. In the global system imposed on third world countries today, and under current IMF regulations, Pakistan has no option but to focus on export led growth. the situation is not extremely bleak though, and there is opportunity in the EU deal waiting to be seized. My suggestion to policy makers is that they should focus on improving terms of trade with the EU, and use the export profits to invest in diversifying future export commodities. the government should also make sure that there are no latent ‘strings attached’ that could harm our already fragile economy.
Salim ghauri
O
NLY a strong domestic industrial and agriculture base can ensure a strong economy of Pakistan, presently, at a critical stage in the wake of rising twin deficits — fiscal deficit and current account deficit. the planning commission has estimated that the total investment of about $4 billion per annum is required to meet the country’s energy needs which are projected to grow at a pace of 2.0 GW per year in the next five years. According to an updated version of Pakistan Integrated Energy Model Policy Analysis Report, almost 12 GW of new capacity will be added to the system by 2015, of which over 8.0 GW is in the planning stage. the report represents a least cost development path for the Pakistan energy sector that supports the government’s projections for GDP growth. However, the projections depend on many factors, such as the demand projections, prices assumed for fuel, cost and performance of future technology options, future characteristics of the existing and committed power plants, and demand sector end use technology choices. Growth of Pakistan economy has become a tricky business. No foreign investment can be chipped in without a reliable and affordable supply of energy. Furthermore, as the past several years of load-shedding have demonstrated; not just the economy, but the quality of life of the people of Pakistan will also at stake if the country is not able to identify a reliable roadmap for its energy future. the options are many, and major decisions need to be made by policy makers. the energy requirements would become double than present and it would cross the figures of 120 MtOE (million tonnnes of oil equivalent) in 2015, if the government plans to achieve the growth target. It may be mentioned here that Pakistan meets 80 per cent of its energy requirement through import. On the other hand, international prices of oil have not only broken the past records, but touching new
energy crisis has declined industrial production by 50 per cent due to which the rate of unemployment has increased
heights which are directly or indirectly affecting the black gold industry badly. Moreover, the speculators estimate that the oil prices would reach to $100 per barrel, very soon. WAPDA, for producing electricity, purchases oil at a high price and shifts the financial burden on the consumers. High electricity tariff has already imbalanced the entire economy. there is a general impression among the concerned circles that the basic reason of energy crisis is the irrational, short-term and wrong policies of the government. the government should focus to develop and promote other resources of energy like atomic energy, search, and use of natural gas, import of natural gas, solar energy, coal and wind energy, apart from oil. Energy crisis has declined the industrial production by 50 per cent due to which the rate of unemployment has increased. Pakistan economy is under strong pressure of energy crisis. Agriculture sector has also taken the hit, impacting the farming capacity due to short supply of energy. Meanwhile, high inflationary pressure, likely to stay at 12 per cent during current year, has shed economic growth further due to limited availability of credit to the private sector. textile industry is expressing its inability to export inflation. A dismal industrial growth has resulted in massive unemployment. the textile industry is pursuing the government for sustained gas supply to the Captive Power Plants. the government is unable to do so because of high demand from domestic consumers on SNGPL network. Closing down of gas-dependent mills is leaving labourers out of job on a large scale. As a result, the street crime is on the rise. Many industrialists are receiving threats of kidnap for ransom. One way of tackling the ongoing energy crisis is permanent closure of gas-dependent Captive Power Plants (CPPs), particularly in textile industry, relatively a cheap fuel against furnace oil to generate electricity. there is a tariff difference of about Rs3 per unit between the mills with gas-dependent CPPs and the PEPCO-fed units. CPPs consume 600MMCFD gas with low efficiency, which means more wastage of precious fuel in generation of electricity. All these CPPs should be handed over to PEPCO for power generation. It should be mandatory for Pepco to ensure 24/7 smooth supply of electricity to the industry. PEPCO can also introduce special tariff for industry, a bit higher than what costs these mills on CPPs. the industry circles have only one apprehension on this arrangement that the government would not be able to ensure priority of electricity supply to industry. they are of the view that they would not only be deprived of their present share in gas, but also electricity supply. the government should act fast and legislate on this point for prudent use of gas as a fuel to produce cheap electricity and keep the industry wheel running. The writer is President American Business Forum, Chairman and CEO NetSol
Marriages are made in Washington
kunwar khuldune Shahid
U
NFORtUNAtELY, we all have to stumble upon those fiddly little moments when we have to take life defining decisions. Some of us prefer to take the backseat and let others take those decisions for us, hence, conjuring up a scapegoat for the inevitable failure in judgment – while others choose to keep the decision-making powers within their own hands. Either way, there is no doubt that one such earth-shattering decision is that of earmarking one’s spouse; a choice
that undoubtedly has lifelong ramifications. Nuptial historians classify marriages into two primary categories; love marriages and arranged marriages. However, there is a painful sub-category of the latter, in which one is pressurised into walking down the aisle with the trophy wife – one that the family has chosen – in lieu of one’s longtime sweetheart. Pakistan is at the crossroads of taking a plunge into one such heartbreak scenario, as our uncle is twisting our arm and forcing us into opting out of a decision that we have long set our heart upon. In this little world of energy crisis driven metaphorical matrimonies, the uncle in question is of course our dear Uncle Sam, with the Iran-Pakistan pipeline playing the high school sweetheart to tAPI’s trophy wife. And with the energy shortage in our neck of the woods well documented – six billion cubic feet natural gas requirement being met with merely 4.1 bcf per day, and gas shortfall of one billion units per day – it would be an
understatement to suggest that Pakistan is in desperate need of gas pipeline wedlock. the IP love affair began in May 2009, with the project expected to bring in around 750 million cubic feet of gas to Pakistan and providing around 5,000 megawatts power generation capacity. Considering their label of being wobbly and indecisive, our government’s uncharacteristically firm stance on the IP pipeline divulges an unprecedented level of passionate affection. Couple this with the global antagonism over all things Iranian, and the devotion becomes all the more momentous. All the same, if there is a ‘Romeo and Juliet’ tale in the global geo-political scene, the Iran-Pakistan pipeline story is that. With Uncle Sam being our godfather, and the final authority on most family matters, the Washington-tehran-Islamabad triangle is reminiscent of Shakespearean tragedies; with unfulfilled promises of teenage lovers mortifying under worldly animosity. Washington’s wide array of sanctions on Iran, owing ostensibly to its civil nuclear programme, has ensured that Is-
SHAHAB JAFRY Business editor
KUNWAR KHULDUNE SHAHID Sub-editor
BABUR SAGHIR creative head
ALI RIZVI Sub-editor
MAHEEN SYED Sub-editor
HAMMAD RAZA layout designer
if there is a ‘romeo and Juliet’ tale in the global geo-political scene, the iran-Pakistan pipeline story is that
lamabad is under escalating pressure to abandon the pipeline project, even though the repercussions for Pakistan are as conspicuous as an African elephant slipping over a banana skin. And with every potential bride shunned by those at the helm of the family, there is an alternate better half that has been identified to distract the Romeo away from his Juliet. Cue tAPI pipeline. tAPI is your typical ‘other woman’ from epic love stories; good looking, strong family background, alluring for one and all barring the protagonist of the tale. However, a closer look suggests that all is not quite as well. With tAPI, it’s the ‘A’ that stands out as the biggest thorn; and any project that traverses the precarious land of Afghanistan falls short of the realm of safety by a good few light years. Also, with the eventual price tag of tAPI gas towering way above that of IP, our uncle’s choice has proved to be more high-maintenance
than earlier perceived to be. Nevertheless, it is easy to discern the reasons behind Uncle Sam and his chums’ desire of uniting Islamabad and tAPI, with western multinational companies’ hegemony over Dauletabad gas reserves. It’s the lust for monopoly over oil and gas; a skewed nuclear proliferation policy; an embarrassing war on terror; and the new great game all thrown into the Middle Eastern/Central Asian cauldron as Washington plans on stamping Islamabad’s marital future. Considering all the aforementioned twists in this dramatic tale, do we actually take the IP project as our lawfully approved gas pipeline for better for worse, for richer for poorer and in sickness and in health, to love and to cherish till death do us part? It seems as if we do. The writer is Sub-Editor, Pakistan Today. He can be reached at
for comments, queries and contributions, write to: MUNEEB EJAZ layout designer
Email: profit@pakistantoday.com.pk Ph: 042-36298305-10 Fax: 042-36298302 Website: www.pakistantoday.com.pk